UK's Upper Tribunal decision in Greene King: tax and accounting

The Upper Tribunal has upheld the Firsttier Tribunal’s (FTT’s) decision in Greene King. Planning designed to obtain a deduction with no taxable receipt was held to have failed. While the law has changed significantly since the transactions occurred, the case provides a useful example of HMRC successfully challenging a taxpayer’s accounting treatment in order to defeat tax planning, and the Upper Tribunal was unwilling to overturn the FTT’s consideration of expert evidence in this regard. The case needs to be seen in the context of the wider ongoing debate on the relationship between accounting and tax when it comes to the taxation of debt. In particular, it upholds the principle that there can be more than one GAAP-compliant way to account for a transaction.

In 2012, the Greene King group lost a case before the FTT in relation to some tax planning (Greene King PLC and another v HMRC [2012] UKFTT 385 (TC)). The aim of the arrangements had been to achieve a tax deduction for intra-group interest payments payable by a Greene King group company, with no offsetting taxable receipt elsewhere in the group.

The FTT struck down the tax planning, finding that it generated a taxable receipt (and created the potential for the Greene King group to be taxed twice). The taxpayer appealed, and the Upper Tribunal reached the same overall outcome as the FTT (Greene King PLC and another v HMRC [2014] UKUT 0178 (TCC)).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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